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Financials Weekly Notes: Wells Fargo, U.S. Bancorp & Deutsche Bank

Overall, this has been a tough week for banks with share prices
declining considerably over trading the first three days of the
week, and recovering only marginally in the latter half. Last week,
prices received a boost from rising hopes of the Republicans and
Democrats joining hands in the wake of the fiscal cliff, and from
optimism towards Greece's bailout. But investor sentiments were
tempered this week when disagreements about the manner in which
Greece's rescue plan should be implemented continued to deter any
action on that front. To make things worse, the increasing
reluctance of Spain's semi-autonomous Catalonia region to shoulder
the country's debt burden only points to more difficulty in
economic reforms for the struggling Eurozone nation.

Banks shares started rising only later in the week, when focus
shifted back home from the events in Europe. The highest quarterly
GDP growth in three years witnessed in Q3 2012, reports indicating
continued improvement in the housing industry and continuing push
by the government to implement spending cuts at the earliest buoyed
the stock market.

As for individual banks,
Wells Fargo
(
WFC
) had a reason to celebrate with the SEC dropping its inquiry into
the bank's alleged misrepresentation of facts while selling
mortgage-backed securities over years prior to the 2008 economic
downturn. U.S. Bancorp (
USB
) continued its acquisition spree with the bank announcing the
acquisition of prepaid card processing company FSV Payment Systems
- barely a fortnight after its decision to acquire AIS Fund
Management. There was some bad news for Deutsche Bank (
DB
) and other foreign banks with a large U.S.-based business, as the
Fed might force foreign banking groups to organize all their U.S.
units under a bank holding company so that they come under the
purview of the Dodd-Frank Act.

Wells Fargo

The U.S. Securities & Exchange Commission (SEC) has decided
to drop its ongoing inquiry into Wells Fargo's role in
misrepresenting the quality of underlying mortgages in securities
worth $60 billion originated by it between September 2006 to
early 2008. The SEC's investigation shadow of doubt over the bank's
booming mortgage business - .something which has now lifted

The SEC earlier dropped a similar mortgage-related inquiry
against Goldman Sachs (
GS
), while it settled similar charges on JPMorgan Chase (
JPM
) and Credit Suisse (CS) for a total of $417 million this
month.

Earlier this week, U.S. Bancorp announced its decision to
acquire the prepaid card processing company FSV Payment
Systems in a bid to gain a larger share of the swelling prepaid
card payment and processing market. The acquisition will benefit
the fifth largest U.S. bank in quite a few ways, as it allows it to
process prepaid card payments in-house and also adds some big names
like Costco, Walgreen and McDonald's to its payments
business.

You can read more about this acquisition and its impact on U.S.
Bancorp in our article titled, U.S. Bancorp Bets On Prepaid
Cards With Latest Acquisition.

See our full analysis for U.S. Bancorp

Deutsche Bank

The Fed is apparently looking to force all major foreign banks
with a considerable business in the U.S. to reorganize themselves
under a bank holding company so that they cannot circumvent the
requirements laid out in the Dodd-Frank Act. This is bad news for
Deutsche Bank, Barclays (BCS), UBS (UBS) and Credit
Suisse (CS) as they may need to raise billions in additional
capital for their U.S. subsidiaries to comply with such a
requirement. In fact, Deutsche Bank and Barclays actually changed
their legal status over recent years to avoid the sting from the
new regulation.

More details about this can be found in our article Fed Likely
To Tighten Regulatory Noose Around Foreign Lenders

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